America’s most watched gauge of consumer prices surged the most since 1981 in March according to the Labor Department’s latest report on Tuesday. The Consumer Price Index (CPI) soared at an annual rate of 8.5% last month, the highest reading in over 40 years, following the rise of 7.9% in February.
Inflation is clearly out of control now and the Biden administration has no idea what to do about it. President Biden blamed the spike in inflation on the Russian invasion of Ukraine, but prices were already rising significantly before the Russians invaded their neighbor.
Some of the biggest contributors to the latest increase in inflation were food, shelter and gasoline, according to the Bureau of Labor Statistics (BLS). In fact, the index tracking gas prices surged by 18.3% in March over February, comprising more than half of the total monthly increase in CPI.
But even excluding more volatile food and energy prices, the CPI also posted a marked move higher in March. The “core” CPI jumped 6.5% in March over last year, accelerating from a 6.4% increase in February and representing the fastest increase since August 1982.
A number of other major categories also contributed to the March increase in CPI. Shelter prices rose 0.5% month-on-month in March and by 5.0% over the last year, the biggest annual rise since May 1991. Airline fares also soared by 10.7% on a monthly basis and by nearly 24% over last year.
Headline consumer price increases have accelerated on an annual basis for seven consecutive months now. Imbalances between supply and demand have persisted, especially in labor — with unfilled job openings still far outpacing new hires — and in commodities amid Russia’s ongoing war in Ukraine. Most of these costs have been passed on to the consumer, of course.
The Producer Price Index (wholesale prices) also jumped more than expected in March, up at an annual rate of 11.2%. after rising 10.3% (annual rate) in February. Excluding food and energy, the PPI increased 7.0% last month, also higher than expected.
US inflation was relatively low for much of the past decade but picked up significantly as the global economy emerged from the pandemic. A number of economists and policymakers thought inflation would ease this year as supply chain issues cleared up and government stimulus faded. But they were clearly wrong in one of the worst economic misses in decades.
Despite a relatively strong labor market, widespread inflation has made the economy’s performance a huge vulnerability for President Biden and Democrats. The administration has tried to rebrand the recent spike of inflation as a “Putin Price Hike.” But the public is not buying that line of rhetoric, and President Biden’s approval rating on the economy ahead of the 2022 midterm elections is at a new record low as of the latest reading.
With gas prices still above $4-per-gallon in much of the country, the White House has tried to craft new policies to help, such as a plan to release record amounts of oil from the Strategic Petroleum Reserve just ahead, which is a bad idea. But President Biden appears intent to go forward with it despite widespread opposition.
And the Biden administration on Tuesday announced that the Environmental Protection Agency is going to allow a new type of blended gasoline containing more ethanol to be sold starting this summer to create more supply. However, only 2,300 of the nation’s 150,000 gas stations will offer the new “E15 gasoline” later this year. So, this will likely have a limited effect on prices. Furthermore, I’ve read that E15 gas is bad for your car. You may want to look it up.
The March inflation report showed how far energy prices have risen in the past year. Overall, the energy index rose 32% in the past 12 months. Rents were up 4.4% compared to the year before. The food index rose 1% in March compared to February. It is up 8.8% over the prior 12 months, the largest increase since May 1981. Few product categories have been left untouched.
Persistently high inflation comes as economists and analysts increasingly fear a looming economic slowdown. In March, Bank of America analysts lowered their estimates for growth in 2022 from 3.6% to 3.3%. The Federal Reserve also recently downgraded its Gross Domestic Product forecasts, with officials cautioning that the war in Ukraine is casting uncertainty over world economic growth this year.
However, Fed officials argue that the US economy is still in a position of strength, given low unemployment and strong household balance sheets. But as it sets out to rein in inflation, the Fed will strive to cool the economy down without causing a recession.
Despite the bad news, the March inflation report offered some optimism. Prices for used cars and trucks, while still sky-high, have come down recently. In March, the price index for used cars and trucks fell 3.8%, clinching a second-consecutive monthly decline.
The bottom line is a growing number of forecasters believe inflation may have peaked with the 8.5% annual increase in March. We’ll see about that. But the likelihood is inflation will remain elevated for the balance of this year.
Finally, a new poll released Sunday by CBS News found that 69% of US adults disapprove of Biden’s handling of inflation. Even among Democrats, 41% disapprove of the president’s response. This is really bad for the president.
I’ll leave it there for today.
Ethanol’s energy density is only 70% of gasoline. It takes 1.43 gallons of ethanol to equal a gallon of gasoline. It is costing more to use E85 because you will get a lower mpg. Not to mention the upcoming world food shortages, where we should be doing all we can to make food more affordable instead of wasting corn on fuel. Then there is the pollution created by E85 in the summertime. Is Biden green? Not when it comes to political expediency.